Nepalese Readymade Garments

Readymade garments sector has grown to be the one of the largest export item in terms of foreign exchange earning and also contributing employment opportunities to large section of communities. The readymade garments ranging from the loom fabrics to mill fabrics are made & exported as per buyers order no matter whether they are traditional or fashion wears. Coats, jackets, jumpers, jumpers, jump suits, shirts and blouses, skirts and trousers, slacks and shorts, quilted jackets & waistcoats etc. made from cotton or rayon are the main categories exported from Nepal. The major export market of Nepalese garments are USA, Canada, Germany, France, Netherlands, UK, Switzerland, Spain, Italy, Australia, India, etc.

Growth of Nepalese RMG Industry

During the multi-fibre arrangement (MFA) era, many Asian countries, including India and Pakistan, were benefiting from the exports of T&C products. However, T&C exports from most of these countries started to decline after developed countries imposed quotas on them. This, however, provided a spillover business to relatively less efficient countries, including Nepal. Having gained experience from Indian businesses in Nepal, the Nepalese entrepreneurs soon came in the forefront by enhancing their capacity to respond to the global demand of T&C products. They even became capable to supply clothing to the renowned US retailers on 'cut, manufacture, trade (CMT)' basis.

Since the RMG industry is highly labour intensive and requires relatively low investment, many manufacturing units came into existence for RMG exports. The number of export oriented RMG manufacturing units continued to grow until the beginning of the quota phase out under ATC. With the phasing out of the quota system and the changes in internal quota distribution policy, the number of establishments declined. In 2001, 212 manufacturing units were operational but after the expiry of ATC, the number has gradually declined. According to the Garment Association of Nepal (GAN), in July 2006, around 30 manufacturing units were in operation.

Employment, Production and Cost

Although data and trend on employment (direct and indirect) in the RMG sector is not readily available, GAN puts the figure at 50,000 (direct only) during the boom period (1999-00), which accounted for 12 percent of employment in the manufacturing sector.

After peaking in 1991/92, the number of manufacturing units in the RMG sector continued to decline while output continued to rise.

Trend, Composition and Direction of RMG Exports

RMG products have occupied a prominent position in Nepal's exports. Its average annual share exceeded 40 percent of Nepal's overseas exports and about 20 percent of the total exports. Until the complete elimination of T&C quotas, RMG exports from Nepal were not affected due to 'backloading' or delay in eliminating quotas on product categories that interested the Nepalese manufacturers.

However, the downward trend in RMG exports was apparent after the last phase of quota elimination in 2004 (Table below). The overseas market dominates the Nepalese RMG exports, accounting for more than 95 percent of the total RMG exports. The exports to India remained modest, despite market proximity and bilateral preferential trading arrangement between the two countries. In recent years, the share of India in total RMG exports has, however, been encouraging.